Tax Time 2023: lodgment period underway

With only a little more than a month into tax time, the ATO has given the green light for taxpayers with uncomplicated financial affairs to lodge their returns.

It says that the information it collects from employers, banks, private health insurers, share registries and other institutions have now been prefilled and ready to go on either MyTax if taxpayers are lodging their own returns, or through tax portals of registered agents, if taxpayers are using those services.

The ATO notes that income such as rental properties, government payments, capital gains from sale of investments, or other income from “side hustles” in particular sharing economy platforms or any cash received for work performed will need to be manually entered. Taxpayers should note that there are multiple current data-matching programs being run by the ATO in the areas of residential property and ride-sourcing, so it is important to get it right the first time this year.

Taxpayers ready to lodge their returns should also be aware of some changes this year which may negatively affect the amount of refund received or in some cases may result in a tax payable.

The first of which is the cessation of the Low and Middle Income Tax Offset (LMITO). This offset ended on 30 June 2022 and therefore doesn’t apply to the current year (ie 2022-23) income tax return. In the 2021-22 income year, this offset reduced a taxpayer’s tax payable by a maximum of $1,500 for those earning between $48,001 and $90,000. For the 2022-23 income year, only the Low Income Tax Offset (LITO) is available for those earning up to $66,667, with a maximum offset of $700 for those earning $37,500 or less.

That means taxpayers earning between $66,668 and $90,000 will generally be liable for $1,500 more in tax than in the previous income year. The second change which taxpayers should be aware of is the new revised fixed rate method for work from home (WFH) deductions. Previously, taxpayers could rely on using the shortcut method at a rate of 80c per hour, this is now no longer available and taxpayers can either claim a revised fixed rate of 67c per hour or use the actual costs method.

To claim this new fixed rate, taxpayers will also need to meet specific record-keeping requirements. Taxpayers are still able to use the actual costs method to deduct WFH expenses but it involves keeping detailed records for all expenses being claimed and is more complex than using the revised fixed rate. Just with this small change, a hypothetical taxpayer working 3 days a week from home for 8 hours per day over 49 weeks will only be able to claim a deduction of $787 in their 2022-23 tax return compared to $940 they would previously be able to claim under the shortcut method. In addition, the ATO has warned taxpayers to carefully assess their circumstances this year as it has noted that many more people are working from home less than the year before.

Due to these and other changes, the ATO has advised taxpayers that the tax estimate from MyTax or their registered tax agent may not match the final tax outcome. It recommends taxpayers wait for their notice of assessment before making any plans for how their tax refunds will be used. This is no doubt to temper the disappointment that many have experienced either firsthand or vicariously through viral social media snippets.

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